New U.S. rule aimed at Huawei's influence focuses on semiconductor suppliers – CBC.ca

The U.S. administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China.

The U.S. Commerce Department said it was amending an export rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”

Reuters first reported the news ahead of the department’s release. The department said its “announcement cuts off Huawei’s efforts to undermine U.S. export controls.”

The rule change is a blow to Huawei, the world’s No. 2 smartphone maker, as well as to Taiwan’s Taiwan Semiconductor Manufacturing Co Ltd. (TSMC), a major producer of chips for Huawei’s HiSilicon unit as well as mobile phone rivals Apple Inc. and Qualcomm Inc.

TMSC announced late Thursday it would build a $12-billion US chip factory in Arizona.

TSMC said Friday it is “working with outside counsels to conduct legal analysis and ensure a comprehensive examination and interpretation of these rules. We expect to have the assessment concluded before the effective date,” the company said, noting that the “semiconductor industry supply chain is extremely complex, and is served by a broad collection of international suppliers.”

Huawei, which needs semiconductors for its widely used smartphones and telecoms equipment, is at the heart of a battle for global technological dominance between the United States and China.

China says it may restrict Apple, Boeing

Huawei, which has warned that the Chinese government would retaliate if the rule went into effect, did not immediately comment on Friday. U.S. stock market futures turned negative on the Reuters report.

“The Chinese government will not just stand by and watch Huawei be slaughtered on the chopping board,” Huawei chairman Eric Xu told reporters on March 31.

But the reaction from China was swift, with a report saying it was ready to put U.S. companies on an “unreliable entity list,” as part of countermeasures in response to the new limits on Huawei, China’s Global Times reported on Friday.

The measures include launching investigations and imposing restrictions on U.S. companies such as Apple Inc., Cisco Systems Inc. and Qualcomm Inc., as well as suspending the purchase of Boeing Co. airplanes, the report said.

The Global Times is published by the People’s Daily, the official newspaper of China’s ruling Communist Party. While the Global Times is not an official mouthpiece of the party, its views are believed to reflect those of its leaders.

The United States is trying to convince allies to exclude Huawei gear from next generation 5G networks on grounds its equipment could be used by China for spying. Huawei has repeatedly denied the claim.

Huawei has continued to use U.S. software and technology to design semiconductors, the Commerce Department said, despite being placed on a U.S. economic blacklist in May 2019.

WATCH l : Canada’s grapples with Chinese reach, global concerns:

Experts raise concerns about Huawei as governments around the world debate whether its technology should be used in 5G networks. Huawei says it has the best technology and welcomes the scrutiny. 7:12

Under the rule change, foreign companies that use U.S. chipmaking equipment will be required to obtain a U.S. licence before supplying certain chips to Huawei or an affiliate like HiSilicon.

In order for Huawei to continue to receive some chipsets or use some semiconductor designs tied to certain U.S. software and technology, it would need to receive licences from the Commerce Department.

Taking advantage of a loophole: Ross

Commerce Secretary Wilbur Ross told Fox Business “there has been a very highly technical loophole through which Huawei has been in able, in effect, to use U.S. technology with foreign producers.”

Ross called the rule change a “highly tailored thing to try to correct that loophole.”

Ross said in a written statement Huawei had “stepped up efforts to undermine these national security-based restrictions.”

Commerce Secretary Wilbur Ross is seen on Capitol Hill in Washington in March. The Trump administration has been pressuring allies to exclude Huawei gear from next generation 5G networks on grounds its equipment could be used by China for spying, a claim Beijing denies. (Andrew Harnik/The Associated Press)

The Commerce Department said the rule will allow wafers already in production to be shipped to Huawei as long as the shipments are complete within 120 days from Friday. Chipsets would need to be in production by Friday or they would be ineligible under the rule.

The United States placed Huawei and 114 affiliates on its economic blacklist citing national security concerns. That forced some U.S. and foreign companies to seek special licences from the Commerce Department to sell to it, but China hawks in the U.S. government have been frustrated by the vast number of supply chains beyond their reach.

U.S. wants to shift rural areas from Huawei tech

Separately, the Commerce Department extended a temporary licence that was set to expire Friday to allow U.S. companies, many of which operate wireless networks in rural areas of the United States, to continue doing business with Huawei through Aug. 13. It warned it expected this would be the final extension.

Reuters first reported the administration was considering changes to the Foreign Direct Product Rule, which subjects some foreign-made goods based on U.S. technology or software to U.S. regulations, in November.

“We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”,” said <a href=”https://twitter.com/SecretaryRoss?ref_src=twsrc%5Etfw”>@SecretaryRoss</a>. <a href=”https://t.co/2G5aSadrxG”>https://t.co/2G5aSadrxG</a> <a href=”https://t.co/R7ptxoqH3X”>pic.twitter.com/R7ptxoqH3X</a>

Most chip manufacturers rely on equipment produced by U.S. companies like KLA, Lam Research and Applied Materials, according to a report last year from China’s Everbright Securities.

The U.S. administration has taken a series of steps aimed at Chinese telecom firms in recent weeks.

The U.S. Federal Communications Commission (FCC) last month began the process of shutting down the U.S. operations of three state-controlled Chinese telecommunications companies, citing national security risks. The FCC also in April approved Alphabet Inc. unit Google’s request to use part of an 12,000-kilometre undersea telecommunications cable between the United States and Taiwan, but not Hong Kong, after U.S. agencies raised national security concerns.

This week, President Donald Trump extended for another year a May 2019 executive order barring U.S. companies from using telecommunications equipment made by companies deemed to pose a national security risk, a move seen aimed at Huawei and peer ZTE Corp.

FILE – In this Thursday, Aug. 31, 2017, file photo, a flame burns at the Shell Deer Park oil refinery in Deer Park, Texas. Oil prices are plunging Sunday, March 8, 2020, amid worries that an OPEC dispute will lead a virus-weakened economy to be awash in an oversupply of crude.

OPEC and allied nations agreed Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to encourage stability in energy markets hard hit by the coronavirus-induced global economic crisis.

Ministers of the cartel and outside nations led by Russia met via video conference to adopt the measure, aimed at cutting the excess production depressing prices as global aviation remains largely grounded due to the pandemic. The curbed output represents some 10% of the world’s overall supply.

But danger still lurks for the market, even as a number of nations ease virus-related lockdowns, and enforcing compliance remains thorny.

Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned meeting attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.

That was a message echoed by Saudi Oil Minister Abdulaziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when U.S. oil futures plunged below zero.

The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision.”

But it is only a one-month extension of a production cut that was deep enough “to keep prices from going so low that it creates global financial risk but not enough to make prices very high, which would be a burden to consumers in a recessionary time,” said Amy Myers Jaffe, senior fellow at the Council for Foreign Relations.

“There is so much uncertainty that I think they took a conservative approach,” she said. “You don’t know how much production is going to come back on. You don’t know what’s going to happen with demand. You don’t know if there’s going to be a second (pandemic) wave.”

Jaffe said improved oil demand in China and Asia and a gradual stabilization of demand in the United States and to some extent Europe, where there’s some cautious economic reopening, were encouraging for producers.

OPEC has 13 member states and is largely dominated by oil-rich Saudi Arabia. The additional countries involved part in the so-called OPEC Plus accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.

Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.

Earlier this year, when demand was down, Saudi Arabia was flooding the market with crude oil, helping to send prices down to record lows. That prompted the U.S. government in April to take the unusual step of getting involved in OPEC’s negotiations, pressuring members of the cartel to agree to cuts to help end the oil price free-fall.

At the time, President Donald Trump said the U.S. would help take on some of the cuts that Mexico was unwilling to make. And perhaps more importantly, a group of U.S. senators upset over the impact on U.S. shale production said at the time that they had drafted legislation which would remove American forces, including Patriot Missile batteries, from Saudi Arabia.

Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.

In a rambling Rose Garden speech on Friday, Trump took credit for the April deal. “People said that wasn’t possible but we got Saudi Arabia, Russia and others to cut back substantially,” he said. “We appreciate that very much.”

U.S. Energy Secretary Dan Brouillette tweeted his applause Saturday for the extension, which he said comes “at a pivotal time as oil demand continues to recover and economies reopen around the world.”

Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported https://www.telegraph.co.uk/business/2020/06/06/hsbc-warns-downing-street-chinese-reprisals-huawei, citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

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Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported here citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

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